Business Magazine

Irrational Exuberance of the Stock Market

Posted on the 06 March 2013 by Eowyn @DrEowyn


Does anyone out there know why the U.S. stock market is so bullish?

From Bloomberg:

“The Dow Jones Industrial Average (INDU) rose to its highest level ever, erasing losses from the financial crisis after a four-year rally fueled by the fastest profit growth since the 1990s and monetary stimulus from the Federal Reserve.”

Jim Cramer, host of CNBC’s Mad Money, shows us how today compares with October 11, 2007, the last time stocks were this high — at 14164.5:

  • Dow Jones Industrial Average: Then 14164.5; Now 14164.5
  • Regular Gas Price: Then $2.75; Now $3.73
  • GDP Growth: Then +2.5%; Now +1.6%
  • Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
  • Americans On Food Stamps: Then 26.9 million; Now 47.69 million
  • Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
  • US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
  • US Deficit (LTM): Then $97 billion; Now $975.6 billion
  • Total US Debt Outstanding: Then $9.008 trillion; Now $16.43 trillion
  • US Household Debt: Then $13.5 trillion; Now 12.87 trillion
  • Labor Force Particpation Rate: Then 65.8%; Now 63.6%
  • Consumer Confidence: Then 99.5; Now 69.6
  • S&P Rating of the US: Then AAA; Now AA+
  • VIX (market volatility index): Then 17.5%; Now 14%
  • 10 Year Treasury Yield: Then 4.64%; Now 1.89%
  • USDJPY (US dollar to Japan yen): Then 117; Now 93
  • EURUSD (Euro to US dollar): Then 1.4145; Now 1.3050
  • Gold: Then $748; Now $1583
  • NYSE Average LTM Volume (per day): Then 1.3 billion shares; Now 545 million shares

What goes irrationally up must come crashingly down. As Cramer puts it, “we all know it’s going to end badly, but in the meantime we can make some money.”

As long as you sell ahead of everyone else.


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